The appraised value of property is an estimate of the sales price at which a property can be sold in the open market after proper marketing and in an arm’s-length transaction, as assessed at the time of appraisal by an independent valuer, taking into account the prevailing market conditions.
Furthermore, it is also considered that both the buyer and the seller are fully informed and are not under any pressure to buy or sell.
It has to be emphasized that the appraised value is an estimate of the fair market price of the property, which is not necessarily the price at which the property will be eventually transacted, even if the transaction takes place shortly after the valuation.
Smart property investors should use valuations by competent and independent appraisers when evaluating an investment opportunity. However, they should carry their own analysis and estimates of what the property is worth to them, (that is, the investment value of the property) given the expected benefits from ownership of the property under consideration and their return and risk preferences.
The appraised value of property carried out by an independent appraiser is, therefore, of interest to property investors but should be viewed very critically, especially if it is considerably higher than the maximum acquisition price that will allow them to achieve their
investment objectives.
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